I have spent 20 years working in nonprofit think tanks, the last 13 as a resident scholar with the Institute for Policy Innovation in Dallas. I also ran the Washington, D.C.-based Council for Affordable Health Insurance for nearly nine years. While I cover a range of political, economic and policy areas, I specialize in health policy. Prior to joining the think tanks, I taught philosophy. I received all three of my degrees—BBA in economics, masters in divinity and Ph.D. in humanities—from Texas universities. I was an ethicist for a medical school's panel reviewing human experimentation. I'm a member of the U.S. Commission on Civil Rights Texas Advisory Committee. For several years I was a political analyst for the USA Radio Network, and I hold a 6th degree black belt in Tae Kwon Do and still teach.

The Most Ominous Sign Yet Health Insurance Premiums Will Explode

Now comes the most ominous sign yet health insurance premiums are going way up: Most health insurers in the individual market have stopped guaranteeing a person’s premiums for a year. And as one commentator quipped: they aren’t doing it because they expect to be lowering people’s premiums.

Traditionally in the individual market, where people buy their own (i.e., non-group) health coverage, applicants sign a contract and the insurance company guarantees that premium for a year. I’m told that about 12 percent of individual applicants would write a check for the year’s premium, rather than being billed monthly.

No more. Health insurers started sending out notices in January informing insurance brokers and agents that the companies will no longer guarantee that premium rate. From now on it’s month to month.

As one benefits company explained:

“After carefully evaluating its individual market and rates, Aetna decided to discontinue its offer of an initial 12-month rate guarantee.

“This change applies to policies with a January 15, 2013 or later effective date, in all states where plans are sold.

“Existing members who are currently in a rate guarantee period will not be affected. The rate guarantee language has been removed from all marketing materials including the state-specific booklets and rate sheets.”

(Update: the day after this column appeared Aetna published a notice saying in part, “While the policies will not have a 12-month rate guarantee, we fully expect the rates to stay the same until December 31, 2013.” While that announcement may alleviate the concerns of some, Aetna is not the only company ending the rate guarantee. And come 2014 all bets are off.)

Thus, an individual buying health insurance for his family thinking he can afford the coverage might be forced to cancel it within a few months because of premium increases.

Why the change? It is all the uncertainty imposed by the misnamed Patient Protection and Affordable Care Act, or ObamaCare. It has thrown so many unknowns into the mix that actuaries don’t know how much to charge.

As one health insurance broker told me, “Any health insurance actuary would be fired for trying to set a premium for a whole year because no one knows how much it’s going to cost.”

Why the uncertainty? Because Democrats crafting ObamaCare ignored virtually every actuarial principle. ObamaCare requires insurers to accept anyone who applies; they can’t charge more for major medical conditions; and they require insurance to cover lots of things that many people wouldn’t choose for themselves.

As retired actuary Mark Litow and I have written elsewhere, health insurance premiums in the individual market will double for some people in some states—and that’s only in the near term.

Now, contrast health insurance with the life insurance market, where people also buy their own policies. There you can buy a policy with a level premium for five or 10 years or more. Of course, one reason that market is so stable is that President Obama hasn’t tried to fix it.

Moreover, these premium fluctuations will wreak havoc on the government’s efforts to provide subsidies to families with incomes up to 400 percent of the federal poverty level. The subsidies cover a portion of the cost of health insurance, up to a maximum out of pocket for the family. The amount of the subsidy is based both on the cost of coverage and income—which will lead to an IRS heyday of snooping, but that’s a topic for another day.

There has been a lot of head scratching over how to deal with the fact that a family’s income can vary significantly within a year, up or down, in ways no one predicted at the beginning of the year. So how does the government determine the correct level of subsidy?

Now add to that mix that premiums can also vary significantly—though only going up, not down.

And if you think this is all someone else’s problem because you have good employer-based coverage, you may be in for a surprise. While the individual market has been relatively small (about 19 million people, according to the Employee Benefit Research Institute) compared to those with employer-based coverage (about 156 million), most honest analysts expect millions of employers to drop coverage and dump their employees into the individual market.

Economic and political uncertainty stifled the economy in Obama’s first four years; but that uncertainty pales when it comes to the uncertainty being experienced in the health insurance market. Millions of Americans will soon discover that health coverage was never so expensive as when Obama decided to make it affordable.

Merrill Matthews is a resident scholar at the Institute for Policy Innovation in Dallas, Texas. Follow at http://twitter.com/MerrillMatthews

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It is hard pill to swallow for many Americans: UK and all of Europe provide better healthcare at a lower cost and many with “socialized” medicine. Yes – there amy be along queue for elective surgery in UK; it is a whole lot better than no queue at all where people just die because they don’t get medical attention. US maternal deaths – 21 per 100,000 live births – UK is at 12. That’s 840 women who died in childbirth – 360 more than would have died in the UK. Sorry Merrill, I realize your salary is tied to bashing Obama – but shouldn’t we expect more from educated and privileged people like you.

Sorry, Sam, your argument makes no sense. First, you need to know that Medicaid pays for 40% of all US births, 50% in many states, and I think 70% in New Mexico. That’s not counting the women with private health insurance. Plus any hospital would take a woman and deliver her baby whether she had insurance or not; that’s federal law. Although it’s been a while since I looked, federal figures said that 96% of US women got prenatal care by the second trimester. So while you are certainly free to believe that single-payer countries have better health care, your example just won’t hold up.

I still cant believe that I live in a Country run by idiots… that think the best way to eradicate trillions of dollars of debt is to spend trillions more of our money.This is a time-bomb with repercussions that will be felt for decades.Our children are so screwed.But……they can get all the abortions they want!

Paulette, it is amazing, isn’t it? I had to laugh when the DC Circuit Court of Appeals vacated a fine the EPA imposed on oil and gas companies for not using a certain of biofuel. And the reason they didn’t use it is because the manufacturers never produced it. The companies couldn’t buy it if they wanted it, and yet the EPA fined them millions of dollars for not using it.

@ Max You said “Given absolute FACT that in countries that have not-for-profit NHS, which is all European countries, Canada, Japan, Israel, Australia, etc. they spend about 9% of GDP on health care while giving health care to all their People.”

But what you carefully avoided was what level of care and what level of freedom, and who was paying the actually almost 15% in some cases GDP. With the exception of Israel, European countries and Canada have some of the lowest quality of care health care in the industrialized world. Before Obamacare, the U.S. had the highest standard of care in the world. Canadians would routinely enter the U.S. to get care that they could not get in Canada.

Next. Obama Care was supposed to “Cut” health care cost, but has already sent it starting to skyrocket as opponents of the measure predicted. In fact, to date, all the predicted results of the opponents has come to pass and none of the benefits that you and your socialist friends claimed have materialized. Once again, absolute FACTS are not your friend. Low cost, quality care can not be accomplished by socialized medicine. Every example of where it has been tried is and example of failure, not success. So even more of your radical claims, can not make your failure into fact. The FACT is, it doesn’t work.

Since the American free-market capitalist system has been fundamentally transforming for quite some time, one could surmise that should health care premiums explode, then ObamaCare (in its basic 2700 page form) could implode. . . . resulting in even more demands for the federal government to invoke even more interaction within the health care system. Could describe the additional interaction by ‘the state’ as ‘tweaking’ . . . or ‘fine tuning’. . . . via executive order if need be.

Even Hillary would rhetorically ask ‘what difference does it make’ . . . since it takes a village to pursue the collective interests of social and economic justice.

Just out of curiosity….has high cost, private quality care worked out so well? I already payout about $16,000/yr for my family. What difference does a couple more thousand make on me? And @ Paulette your absolutely right, my generation is screwed! However, I would like to say we were screwed long before Obama & the affordable care act came into play.

Just to be clear Nicole T…..”screwed” in the context of my meaning is owing your government over $50K before you draw your first breath. BHO is ensuring that with every stroke of his manipulated pen.No other POTUS before him has been so determined to add to the numbers on the dole. Even REWARDING states for doing so!His Anti-Americanism is only surpassed his inadequacy to lead. While others before him made mistakes;NEVER before have the tentacles of the fallout been so long and far reaching.

If the government would have just set aside a fund to pay the medical expenses of those who are uninsurable, it would have cost a lot less than this monstrosity, and not bring the government intruding into our most private matters. I believe some states do have such funds.